SUB-$2.00 GAL GASOLINE FILTERS INTO WINTER LANDSCAPE
If you live in South Carolina, Oklahoma, parts of rural Texas, Georgia, Tennessee, and Missouri, you probably can find some retail gasoline prices below $2.00 gal among some of the more aggressive C-store chains and Big Box sales formats this week. Our OPIS survey for AAA is picking up numbers below $2.00 gal in various pockets in those areas, and it wouldn't surprise me to see perhaps half a dozen states find the leading edge move to prices that low within the next few weeks.
This is nothing more than a manifestation of the 10-15cts gal in holiday wholesale drops getting immediately passed on to retail. It won’t happen everywhere, and indeed at $1.99 gal or less, the retail vendor is making little in the way of profit on gasoline. We should see retail prices continue to drift lower through the month - - but the next major spasm in oil prices should be to the upside, and it is likely to occur in the Feb. 15-May 15 time period.
Meanwhile, there’s an harmonic convergence of sorts on nationwide prices. The average retail pump price for unleaded gasoline across the country stands at $2.305 gal this morning. That compares with $2.30 gal one month ago and $2.305 gal one year ago. I’m not quite sure I remember a day in recent history where there was less than a penny’s worth of difference for the different time frames.
I suspect that retail prices will continue to drift lower, even though this looks like a week where crude oil and gasoline futures may stabilize. We are within 22 days of scheduled OPEC cuts and the market doesn’t often fall $8 bbl without a rebound. This is not the beginning of a new cheap era of oil prices.
OPIS Almanac for 1/9/2007: As noted, the nationwide average price today is $2.305 gal - - based on estimated motorist demand of about 388.4-million gal per day of fuel, that works out to a January 9th bill of some $895.2-million. We used about 15-million or 16-million gal less gasoline on the same day a year ago, so the daily bill in 2006 was just $860.5-million.
In 2005, we were paying $1.784 gal at a daily cost of $651-million; in 2004 this day cost Americans about $543-million; in 2003 it was $513.4-million; in 2002 we paid about $394-million; and in 2001, the retail price of $1.447 gal, when multiplied by some 345.5-million gal of demand, worked out to a January 9th fuel bill of $499.8-million.
Let’s hope Detroit is paying attention to these numbers. I noted a strange mixture of efficient and excessive vehicles rolled out at the Auto Show this weekend. It looked like Toyota was betting on lower fuel prices - - they rolled out monster truck after monster truck in the limited media footage I viewed.
Automakers , motorists, macroeconomists, and small businessman should all count on a third year where the daily bill for gasoline will exceed $1-billion. We’ll probably cross that threshold some time after the Spring equinox. If I had to put a best guess on a target date, I’d suggest April Fool’s Day.